Johnson & Johnson (JNJ)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 4.46 | 4.86 | 4.92 | 5.82 | 5.96 |
| Receivables turnover | 5.97 | 5.65 | 4.92 | 6.11 | 6.05 |
| Payables turnover | 5.38 | 5.64 | 5.11 | 5.47 | 5.86 |
| Working capital turnover | 15.90 | 11.65 | — | 5.93 | 9.40 |
Based on the provided data for Johnson & Johnson's activity ratios, we can analyze the following:
1. Inventory Turnover:
- Johnson & Johnson's inventory turnover has been relatively stable over the years, ranging from 4.46 to 5.96. A decrease in inventory turnover may indicate potential issues with sales or excess inventory on hand, while an increase may suggest efficient inventory management.
2. Receivables Turnover:
- The receivables turnover for Johnson & Johnson has fluctuated between 4.92 and 6.11. A higher turnover ratio indicates that the company is collecting its accounts receivable more efficiently. A consistent or increasing trend in receivables turnover is generally favorable.
3. Payables Turnover:
- Johnson & Johnson's payables turnover ratio has ranged from 5.11 to 5.86, indicating how quickly the company pays its suppliers. A higher turnover ratio typically suggests more efficient management of accounts payable.
4. Working Capital Turnover:
- The working capital turnover for Johnson & Johnson has shown variability over the years, with significant changes. A higher working capital turnover ratio implies effective utilization of working capital to generate revenue. A strong upward trend in this ratio may indicate improved operational efficiency.
Overall, analyzing these activity ratios provides insights into Johnson & Johnson's management of inventory, receivables, payables, and working capital. Companies aim to maintain efficient turnover ratios to optimize resource allocation and enhance overall financial performance.
Average number of days
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 81.87 | 75.09 | 74.17 | 62.71 | 61.24 |
| Days of sales outstanding (DSO) | days | 61.14 | 64.61 | 74.26 | 59.75 | 60.30 |
| Number of days of payables | days | 67.84 | 64.69 | 71.43 | 66.75 | 62.30 |
The activity ratios for Johnson & Johnson show the efficiency of the company in managing its inventory, collecting receivables, and paying its suppliers.
1. Days of Inventory on Hand (DOH): The trend of Johnson & Johnson's DOH ratio has been increasing over the years, indicating that the company is holding inventory for a longer period before selling it. This could be due to factors such as changes in demand, production delays, or inventory management issues. It is crucial for the company to monitor and optimize its inventory levels to avoid excess holding costs and potential obsolescence.
2. Days of Sales Outstanding (DSO): Johnson & Johnson's DSO ratio has shown some fluctuations but remains relatively stable over the years. A lower DSO indicates that the company is efficient in collecting payments from customers, whereas a higher DSO may suggest delays in receivables collection, credit terms, or potential credit risks with customers. It is important for the company to maintain effective credit policies and follow up on overdue payments to optimize cash flow.
3. Number of Days of Payables: The number of days of payables for Johnson & Johnson has also shown some variability but has generally increased over the years. A longer payment period may provide the company with additional working capital, but it could also strain relationships with suppliers if extended excessively. Managing payables effectively is essential to maintain good supplier relationships and ensure the continuity of the supply chain.
Overall, analyzing these activity ratios together provides insight into how well Johnson & Johnson is managing its working capital and operational efficiency. The company should continue to monitor these ratios, identify areas for improvement, and implement strategies to enhance its overall performance in inventory, receivables, and payables management.
See also:
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 4.32 | 4.22 | 4.42 | 4.92 | 4.38 |
| Total asset turnover | 0.49 | 0.50 | 0.42 | 0.51 | 0.47 |
The fixed asset turnover ratio measures the efficiency of Johnson & Johnson in generating revenue from its fixed assets. Over the five-year period from 2020 to 2024, the company's fixed asset turnover ratio has shown slight fluctuations but has generally remained high, indicating that Johnson & Johnson is effectively utilizing its fixed assets to generate sales. The ratio increased from 4.38 in 2020 to 4.92 in 2021, before slightly declining to 4.42 in 2022, and further to 4.22 in 2023, and finally rebounding to 4.32 in 2024.
On the other hand, the total asset turnover ratio reflects the company's ability to generate sales from all its assets. Despite some fluctuations, the total asset turnover ratio of Johnson & Johnson has been relatively stable over the same period. The ratio increased from 0.47 in 2020 to 0.51 in 2021, then decreased to 0.42 in 2022, increased to 0.50 in 2023, and slightly decreased to 0.49 in 2024. Overall, the total asset turnover ratio indicates that the company efficiently utilizes all its assets to generate revenue, although there was some variability in performance across the years.
In conclusion, both the fixed asset turnover and total asset turnover ratios suggest that Johnson & Johnson has maintained solid efficiency in generating revenue from its assets, with the fixed asset turnover showing higher levels of efficiency specifically in utilizing fixed assets for revenue generation.